African-American households have lost wealth in the last decade, and now stand on the edge of widepread insolvency. The lack of assets is most evident among single parent households headed by African-American women.
The new data, culled from the 2007 edition of the Federal Reserve's Survey of Consumer Finances, reveals how inequalities in wealth between white and black households have grown since 2004.
African-American women that are the sole head of households have a median net worth (MNW) of five ($5) dollars during their prime earning years - ages 36 to 49. The same subset of single white women have a MNW of more than $42,000.
The stress implied by living under these kind of budget constraints would be incredible. It means that not only can a parent not afford to miss a day of work or pay for a repair, she can't even afford to hire a babysitter for one hour without going into debt. Back to the unbanked, this also underscores why she can't afford even one overdraft charge.
It isn't just single women from age 36 to 49. Single parents at any age level are likely to be asset poor. Forty-six percent of single African-American female parents have zero or negative net worth.
Asset type is also relevant. More than half of U.S. households own stocks, and more than 80 percent of white married families with children own their own home. For the single African-American female with kids, it is much different. The majority of their wealth and debt is tied up in automobiles. Cars are a depreciating asset. To the extent that liquidity of assets is determinant of their ability to protect a household during sickness or some other emergency, cars are less than ideal. Cash is best, but even stocks or home equity offer more flexibility. A family can sell their car, but then they reduce their capacity to get to work.
This asset mix should be particularly problematic after the 2010 data (due in the fall) comes out. The stock market swooned, but the Dow is now above 10,000. By contrast, many people are still out of work. Home equity has disappeared. Fuel costs are still going up.
Single African-American men are much better off, with a MNW of $7,900. Parenthood appears to enhance the discrepancy. Single African-American fathers *with children under 18) have a MNW of $10,960, while single African-American mothers are at or below zero. The implications are stark: single female parents cannot afford to take even one day off from work, or get a repair on an appliance, without going into debt. By contrast, single parent white women have a MNW of $41,500 and single white fathers have MNW assets of $79,400.
These numbers reflect obstacles to building wealth. For professionals, saving money is obstructed by the cost of student loans. Inheritances play a role, too. The trends would appear to be worsening. Utility costs for low-income households are taking a larger and larger share of budgets.
Looking across the landscape of daily life, these numbers also hint at challenges within our system of affordable housing. Single parents are prime recipients of Section 8 housing vouchers. While those vouchers pay a lion's share of rent as well as utility costs, they do not cover the cost of putting down a deposit. This probably narrows the set of realistic housing choices. In our community, scores of multifamily apartment buildings offer homes with deposits of less than $100. By contrast, most of the detached single family houses available to Section 8 voucher holders come with deposits of $750 to $1250.
The Center for Community Economic Development hints at other potential factors contributing to inequality. African-American women are less likely to get social security, and when they do, they receive less. Social security is an unusual factor, though, because the rate of Social Security participation is even lower for Asian and Hispanic women.
To the extent that black women are more likely than white women to seek out a black spouse, rates of male incarceration contribute to lower lifetime earnings and assets.
Last, the authors suggest that geographic location plays a part, too. To the extent that low-income households live in low-income neighborhoods, then those families are less likely to live near a bank.